Macroeconomics

p HomeworkFaisal AlshalanSchool XXXXXXProfessor XXXXXXEcon 220 , Spring 2008 HomeworkThe United States (US ) experienced a recession in 2001 . Its in truth GDP growth stray dropped to 0 .3 (see Table 1 . The clandestine domestic investing (made up of plant and equipment and new house investments collapsed recording a disallow real growth of 10 .7 , growth in real personal consumption slowed down , real trade deficits worsened , prices of domestically produced goods shoot up , and unemployment deem stood at 4 .8The US government adopted expansionary programs and measures to bring the economy cover to its normal track . On the part of the US telephone exchange Bank (Federal Reserve [Fed] , it lowered the average dissolve locate charged to banks for short-term reference point from 3 .40 in 2001 to 1 .17 in 2002 (see Table 2 ) - the seasonal credit and appointment credit interest judge were reduced in 2002 from the 2001 aims . This was aimed at encouraging banks to borrow much from the Fed , thereby change magnitude the amount of coin total and credit available to lineage investors and consumers at reasonable lending rates . Increased credit access would raise consumer and business spending that would consequently foster employment aim lower the rate of price increases , and chivy the slowing US economyThe significant cut of the average discount rate by 65 .6 in 2002 increase the money supply (M1 ) from 1 ,181 .9 billion in 2001 to 1 ,219 .7 in 2002 . This has consequently increase the real private domestic investment from a negative growth in 2001 to a 1 -real growth in 2002 . This could be attributed to increased housing constructions generate by lower housing loan rate , and increased demand for commercial and industrial loans . These increased demand , in turn , have lowered the price increases of domestically produced goods at 1 .1 in 2002 and improved the real GDP level - growth rate registered at 2 .

4 in 2002 from but 0 .3 in 2001However , the M1 rate of increase in 2002 of 3 .2 might not be enough to spur more private domestic investment as the latter entirely grew at 1 in 2002 - a growth level , which is less than the percentage increase in the money supply and less than the percentage reduction in the discount rate . The induced private investment was not enough to kowtow the unemployed persons in the economy as unemployment rate has change surface increased from 4 .8 in 2001 to 5 .8 in 2002 - the unemployment rates based on gender and race also increased . However , with the lagging effect of lowering the discount rate , its economic effects , particularly effects on private domestic investments , could be observed in 2003Table 1 . real number US Gross Domestic Product by disbursal , Implicit Price Deflators , and Unemployment Rates2000 2001 2002 2001 2002Gross Domestic Product by using up billion , 100 1996 )Annual ChangeGross Domestic Product 9 ,191 .4 9 ,214 .5 9 ,439 .9 0 .3 2 .4Personal Consumption 6 ,223 .9 6 ,377 .2 6 ,576...If you want to get a plenteous essay, order it on our website: Ordercustompaper.com

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